Morgan Stanley Financials Conference. Tom Naratil Group Chief Financial Officer

Transcription

1 Morgan Stanley Financials Conference Tom Naratil Group Chief Financial Officer March 29, 2012

2 Cautionary statement regarding forward-looking statements This presentation contains statements that constitute forward-looking statements, including statements relating to UBS s financial performance and statements relating to the anticipated effect of strategic initiatives on UBS s business and future development. Factors that could cause actual developments and results to differ materially from UBS s expectations include, but are not limited to: whether UBS will be successful in effecting organizational changes and implementing strategic plans, and whether those changes and plans will have the effects intended; developments in the markets in which UBS operates or to which it is exposed; changes in the availability of capital and funding; UBS's ability to reduce its Basel III risk-weighted assets in order to comply with Swiss capital requirements without adversely affecting its business; changes in financial regulation in Switzerland, the United States, the United Kingdom and other major financial centers; possible constraints that regulatory authorities may impose directly or indirectly on UBS s business activities, whether as a consequence of the unauthorized trading announced in September 2011 or for other reasons; changes in UBS s competitive position, including whether differences in regulatory requirements applicable to UBS will adversely affect its ability to compete in certain lines of business; the liability to which UBS may be exposed due to litigation, contractual claims and regulatory investigations; the effects on UBS s cross-border banking business of tax treaties recently negotiated by Switzerland or to be concluded in the future; UBS s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses; limitations on the effectiveness of UBS s internal processes for risk management, risk control, measurement and modeling; changes in accounting standards and policies and future accounting determinations relating to goodwill and other items; whether UBS will be successful in keeping pace with competitors in updating its technology, particularly in trading businesses; and the occurrence of operational failures, such as fraud, unauthorized trading and systems failures. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS s Annual Report on Form 20-F for the year ended 31 December UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise. Disclaimer: This presentation and the information contained herein are provided solely for information purposes, and are not to be construed as a solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS AG or its affiliates should be made on the basis of this document. No representation or warranty is made or implied concerning, and UBS assumes no responsibility for, the accuracy, completeness, reliability or comparability of the information contained herein relating to third parties, which is based solely on publicly available information. UBS undertakes no obligation to update the information contained herein. UBS The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. 1

3 Key messages Our strategy is centered on our pre-eminent wealth management businesses and our universal bank in Switzerland. It builds on the strengths of all of our businesses, supported by our industry-leading capital position We continue to grow our wealth management businesses and see strength in key geographies and business lines elsewhere across the Group We remain vigilant on costs as we strive to improve returns to our shareholders We are on track to achieve the targeted Basel 3 risk-weighted assets of no more than CHF 150 billion in our core Investment Bank Capital strength is the foundation of our success and we are targeting a common equity tier 1 ratio of 13% under Basel 3 We have every reason to be confident in our future 2

4 Our wealth management businesses are unrivaled World leading HNW and UHNW wealth manager, unrivaled in scope, reach and client mix with a strong footprint in all major financial centers Invested assets CHF 1,459 billion UBS WM Americas UBS Wealth Management Pre-tax profit 1 (WM+WMA) Quarterly average Net new money (WM+WMA) Quarterly average 8.9 (4.6) (CHF million) (CHF billion) (24.7) Our footprint: >11,000 advisors in ~550 offices in more than 40 countries 1 Excluding restructuring charges, gains from the sale of the strategic investment portfolio in 3Q11 (WM) and 3Q10 provision related to an arbitration matter (WMA); 2009 includes restructuring charges for WM&SB of CHF 322 million 3

5 Our clients turn to us for advice to address their concerns Our clients positioning is a reflection of market uncertainties Americas Europe concern Size of US national debt Oil prices European debt crisis concern European debt crisis Macro concerns on growth/gdp Taxation policy Large cash holdings Switzerland Large cash holdings European debt crisis concern Emerging Markets European debt crisis Middle East unrest Size of US national debt concern Strength of the Swiss franc Real estate prices Large cash holdings Focus on capital preservation concern APAC European debt crisis European economy Oil prices Large cash holdings Large cash holdings 4

6 Why clients value UBS Investment Bank What clients need from our Investment Bank Sovereigns, institutional and corporate clients Wealth management clients Geographic footprint Strength and presence in each region and particular strength in APAC Dedicated Investment Bank coverage for UHNW and onshore presence in wealth management growth markets Product development Leading structuring capabilities across asset classes, products and markets Thought-leading, customised development Creative, innovative products suitable to WM investors Bespoke solutions for top tier clients Execution / risk capabilities Global market reach Leading low latency execution platforms Top 3 Futures Clearing platform Market maker/major liquidity provider Impeccable and cost effective execution and market making for listed and OTC products Access to Prime Brokerage platform for semiinstitutional clients Research Deep insights into economic, market and geopolitical environments through presence and relationships throughout the globe Strong equities presence in all major markets Top tier research offering: single stock, sector and macroeconomic Effective aggregation of research content into actionable ideas M&A / Corporate Finance Thought leadership and insights provided by global advisory coverage teams Efficient access to large institutional and private investor base as well as other service offerings Access to advisory skills, and ECM / DCM platform for entrepreneur clients Access to capital markets and institutional investor base 5

7 Our strategy builds on the strengths of all of our businesses We are centered on our pre-eminent wealth management businesses and our Swiss universal bank, building on the strengths of all of our businesses WM Delivered stronger FY11 profits #1 in Europe, APAC, EM, CH and UNHW by invested assets Access to growth through unique client base and global footprint Industry-leading productivity per FA: #1 vs. US peers 1 in invested assets, revenue and NNM WMA R&C Cost / income ratio in line with our largest scale peer 1 Focus on HNW & UHNW segments has resulted in significant increases in credit line balances and NNM since 2009 Leading retail and corporate business in Switzerland inherently stable Contributes to growth in Wealth Management, Global Asset Management and the Investment Bank Continued to attract deposit inflows Global AM Well-diversified across investment capabilities, regions and distribution channels Very successful alternatives platform, including our real estate and fund of hedge funds businesses both ranked top 3 globally 2 Consistently top-ranked research house 3, top 3 Global Equities House 4 IB Top 3 overall FX market share 5 consistently since 2005, #1 FX House Strong global footprint: consistently top 3 in APAC IBD 7, #1 Pan-European brokerage firm 8 and leading Australian franchise 1 Based on public sources of BoA, MSSB, WFC 2 InvestHedge March 2012, Pensions & Investments October Institutional Investor UBS estimates based on companies reporting FY2011 revenues 5 Euromoney FX Poll ( ) 6 Risk Magazine, September Dealogic 8 Thomson Extel surveys

8 Wealth Management We have a strong presence in APAC and in the highest growth markets.. Net new money growth Gross margin Cost / income ratio FY11 inflows of CHF 23.5 billion (3.1% NNM growth) Our focus is attracting quality invested assets; our strong liquidity position means we do not need to compete aggressively for deposits Benefits from a positive capital markets cycle Continued progress: FY11 96bps 1 up from 92bps in FY10 Growth drivers: Lombard lending, brokerage, pricing and mandates Clients held ~27% of invested assets in cash and cash equivalents at the end of 4Q11 Disciplined approach to investment in growth areas Benefit from 20% of the CHF 2 billion cost reduction program announced in July 2011 by the end of 2013 Strong positive operating leverage from strengthening revenue % % bps (10.4) (1.5) and should see improvements as client confidence increases 1 Adjusted for the gain on the sale of the strategic investment portfolio (CHF 433 million) 7

9 Wealth Management Americas Strong profit performance for FY11 and Net new money growth Net inflows of CHF 12.1 billion after outflows of CHF 6.1 billion in FY10 Industry-leading net new money growth rates; NNM including dividends and interest were CHF 30.4 billion in FY11 Future growth driven by same store advisors % 2-4% 1.8 (1.8) (0.9) Gross margin was within our target range of basis points Gross margin Continuous pressure from low interest rate environment partially offset by pricing initiatives Capturing banking and lending opportunities with clients will support our margins bps Cost / income ratio Improved cost / income ratio ~90% for FY11 and narrowed the gap with our largest peers Retaining high-performing FAs is key; attrition rates remain at all time lows Drive advisor productivity through increased training, teaming and platform enhancements we are confident we can deliver USD 1 billion pre-tax profit in the future %

10 Retail and Corporate Leading retail and corporate business in Switzerland Net new business volume growth Volume growth in client deposits of 6% in 2011 Seizing growth opportunities in advisory and execution services Targeting growth in mature markets by capitalizing on our universal business model % NA 4.0% 3.5% 1-4% Net interest margin Disciplined interest rates on deposits Interest on loans: enforcing risk adjusted pricing Significant upside potential in a normalized interest rate environment bps Cost/income ratio of ~52% well within its target range Cost / income ratio Continued tight cost discipline Strong revenue generator, providing opportunities and revenues to other business divisions % with resilient underlying performance 9

11 Global Asset Management Well-diversified across business lines, regions and distribution channels Net new money growth Gross margin Cost / income ratio Third party inflows of CHF 12.2 billion excluding money market for FY11 Grow third-party wholesale by building on our strengths in APAC and Switzerland Expand our leading alternative asset management capabilities and continue to grow passive capabilities Focus on growth in high margin alternatives businesses offsetting lower-margin passive expansion Attractive margins in third party wholesale business Recovery of performance fees as markets normalize; > CHF 18 billion of A&Q invested assets were within 5% of their high water mark at the end of 4Q11 Continued tight cost control Highly scalable platform ability to significantly expand AuM without material additional cost % % bps 3-5% (8.0) with growth initiatives focused on alternatives, passive and third party wholesale 10

12 Investment Bank Our efforts are focused on prudent risk reduction Riskweighted assets reduction (Basel 3) Cost / income ratio Targeting CHF 190 billion RWAs by ; good progress in market risk RWA reduction in 4Q11 Optimize capital allocation while actively reducing risk Substantial RWA reduction through business realignment and right-sizing, particularly in FICC Balanced business mix will support lower and less volatile cost / income ratios Discretionary spending focused on client revenue generating activities CHF 1 billion benefit of the CHF 2 billion cost reduction program announced in July 2011 by the end of 2013 % CHF billion Basel 3 ~220 ~212 <150 NA Target Pre-tax return on attributed equity Expected reduction of attributed equity in future from CHF 27.5 billion at to closer to CHF 20 billion in future Attributed equity reflects the size of the business in terms of RWAs, risks, assets and full allocation of goodwill Focusing on businesses which are relevant to our clients, maximize our market standing, have attractive growth prospects and together meet our RoE requirements as we strive to achieve attractive returns in the future % NA

13 We remain vigilant on costs We are managing scarce resources by driving tactical and strategic efficiency initiatives Tactical actions Optimization Process industrialization CHF 2 billion cost elimination program announced in July 2011 Cost savings distribution pro-forma 2013 Embed cost discipline in the culture of the bank Pre tax profit targets and cost / income targets rather than revenue as primary bonus relevant KPIs Continuously increasing efficiency by reducing unit cost year on year These measures should increase adaptability in changing market conditions 20% 50% 11% 8% 12% Investment Bank Wealth Management Retail & Corporate Wealth Management Americas Global Asset Management > CHF 1 billion cost savings expected to be achieved in 2012 while continuing to invest in key growth areas 12

14 Our capital, liquidity and funding positions are strong Capital strength is the foundation for our success Capital position 1 Industry-leading Basel 2.5 tier 1 capital ratio: 15.9%, core tier 1 ratio 14.1% 48% increase in tangible book value per share (TBVPS) to CHF since through earnings accretion Highest TBVPS CAGR-growth among our peers since 2009 at 17% Liquidity & funding 1 Provisional Basel 3 liquidity coverage ratio 2 in line with Basel 3 requirements With 23% available liquidity of funded assets among the industry-leading banks Sound funding sources: diversified by market, product, tenor and currency Customer deposits and long-term debt > 50% of funded balance sheet Balance sheet 1 Funded balance sheet reduced by 58% to CHF 932 billion from peak 3 Liquidity substantially improved: ~81% decrease in the trading portfolio from peak 3 and a relative increase of highly liquid assets 4 1 On Estimated on Refers to balance sheet (excluding positive replacement values) 4 Refers to cash and balances with central banks and financial investments available-for-sale 5 For 2009 and earlier, calculation adjusted to include shares related to mandatory convertible notes 13

15 Risk-weighted assets Basel 3 1 We have reduced RWAs swiftly and we are ahead of our plan ~400 2 ~21 ~80 4 ~220 4 ~380 ~20 ~62 ~212 Group SNB StabFund 3 CHF (145) billion net reduction of IB RWAs CHF 15 billion RWA growth in other businesses Legacy: CHF ~18 billion reduction CHF 11 billion of reduction driven by restructuring of a student loan auction rate securities portfolio Core Investment Bank: CHF ~8 billion reduction Significant decrease in market risk RWAs partly offset by higher estimated Basel 3 CVA charge following downgrades of major counterparties in 4Q11 ~340 ~45 ~190 ~290 ~30 <150 ~270 < estimated pro-forma estimated pro-forma target target 5 1 Our pro-forma Basel 3 RWA are based on estimates and will be refined as we progress with our implementation of new models and associated systems pro-forma RWAs of CHF ~400 billion already factored in the 4Q11 reversal of CHF 17 billion of stress VaR related to the unauthorized trading incident 3 SNB StabFund option or underlying assets; assumed constant for future periods (CHF ~20 billion) 4 Final composition of the legacy portfolio as of Original disclosure was CHF ~70 billion in Legacy and ~CHF 230 billion in Core Investment Bank 5 Target assumes constant FX rates target 5 We will continue our disciplined approach to RWA reduction 14

16 10.1% 1.1% 2.9% 10.8% 1.1% 3.0% 14.2% 0.7% 1.3% 3.2% 18.7% 1.7% 1.1% 3.6% We are targeting a common equity tier 1 ratio of 13% We intend to issue loss-absorbing capital on a global basis 13% 1 2 Common equity Loss-absorbing capital Basel 3 Basel 3 phased-in scenario 1,2 Goodwill / intangible assets 3 Capital deduction items CET1 ratio rules fully applied 1 6.2% 6.7% 9.7% 0.7% 14.0% 1.7% Target capital structure Target lossabsorbing capital Target common equity capital 19% 4 6.0% 10.1% 10.8% 13.5% 16.9% 6.2% 6.7% 9.0% 12.2% 13.0% (CHF billion) Target capital ratios CET1 capital ~35 RWAs ~400 ~380 ~340 ~290 ~400 ~380 ~340 ~290 ~270 (~20) (~20) 1 Our pro-forma Basel 3 RWA and CET1 capital are based on estimates as presented at the Investor Day 2011 and will be refined as we progress with our implementation of new models and associated systems 2 Deferred tax assets on net operating losses of CHF 8.0 billion on : net decrease due to amortization of CHF 0.5 billion in 2012 and Deferred pension expenses of CHF 3.3 billion on (current accounting rules applied). Other deduction items not taken into account. Deduction for exposures in financial industry excluded as rules need further clarification 3 Goodwill and intangible assets will be deducted from CET1 capital under Basel 3. In the transition period, there will be a phase-in during which they will be deducted from tier 1 capital and not from CET1 capital up to the amount of outstanding phased-in hybrid tier 1 capital 4 UBS is eligible for a capital rebate on a portion of the capital requirement subject to measures taken to improve resolvability 15

17 We are confident about our future Our business Unrivalled wealth management franchise - Well positioned in largest and fastest growth markets - CHF 1.5 trillion AuM; CHF 2.9 billion pre-tax profit 1 Leading retail and corporate business - Inherently stable business with strong earnings generation - Pre-tax profit of CHF 1.9 billion Focused Investment Bank - Top 3 position in equities and FX - Thought leadership by global advisory coverage teams Well-diversified asset management business - Successful alternatives platform - Consistently profitable, low capital intensity business Our actions Continue to strengthen our leading capital position and sound liquidity and funding On track for the CHF 340 billion RWA target by end 2012 Achievement of phased-in Basel 3 CET1 of 13% targeted by the end of 2012 Cost savings of CHF 2 billion in progress - > CHF 1 billion to be achieved by end 2012 Dividend of CHF 0.10 proposed - Progressive returns program to be implemented as we successfully execute on our strategy Upside potential 27% of WM clients AuM in cash earning very low margins USD 28 billion of money market funds in WMA waiving > USD 100 million p.a. Significant upside potential in WM, WMA and R&C from increased market rates > CHF 18 billion of Global AM A&Q funds within 5% of high water marks Cost industrialization process initiated - material savings expected from multi-year program Strongly geared towards a more positive capital markets cycle in the medium and long term Long term franchise value with Group return on equity of 12-17% 1 Excluding restructuring charges and the gain on the sale of the strategic investment portfolio Our actions should enhance our ability to deliver a progressive capital return policy 16

18 Key messages Our strategy is centered on our pre-eminent wealth management businesses and our universal bank in Switzerland. It builds on the strengths of all of our businesses, supported by our industry-leading capital position We continue to grow our wealth management businesses and see strength in key geographies and products across the Group We remain vigilant on costs as we strive to improve returns to our shareholders We are on track to achieve the targeted Basel 3 risk-weighted assets of no more than CHF 150 billion in our core Investment Bank Capital strength is the foundation of our success and we are targeting a common equity tier 1 ratio of 13% under Basel 3 We have every reason to be confident in our future 17